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ADISA Submits Comments to the SEC's Proposed Rule: Regulation Best Interest

Aug 07, 2018

ADISA submitted comments to the secretary of the SEC regarding the Proposed Rule: Regulation Best Interest (Release No. 34-83062; File No. S7-07-18) issued on April 18, 2018, to express the views of and address concerns raised by those firms operating in the private placement and non-traded investment (i.e. direct participation program) sectors.

The DOL Fiduciary Rule is related to the SEC’s RBI effort, and ADISA has previously provided its perspective and input on several occasions (see: ADISA’s letters of July 2015, September 2015, and March 2017), as well as our appearances before the DOL in August 2015 and the Office of Management and Budget in March 2016.  Additionally, research performed by the Financial Services Roundtable with ADISA was cited by the SEC in the Proposed Rule itself.  

ADISA’s recommendations and concerns included: 

  1. The RBI should require that a financial professional have a “reasonable basis to believe that a series of recommended transactions, even if in the retail customer’s best interest when viewed in isolation, is not excessive and is in the retail customer’s best interest when taken together in light of the retail customer’s investment profile.”
  2. Disclosure requirements and use of the words “advisor” and/or “adviser” in titles for financial professionals.
  3. The SEC should consider aligning the definition of a retail customer with FINRA’s definition of retail investor by indicating that “person” does not include an institutional investor.

ADISA believes in appropriate regulation for all of our members and their various activities, and our overriding goal is to ensure that the cost imposed by a new regulation should be exceeded by the benefit produced thereby. ADISA also urges the SEC to consider the needs of the smaller investors and the smaller broker-dealers who service those investors to ensure a thriving marketplace, consistent with investor protection and appropriate compliance and oversight.

The comment letter was drafted by ADISA Legislative & Regulatory Committee Chair Catherine Bowman, The Bowman Law Firm; Deborah Froling, Kutak Rock; ADISA Immediate-Past President John Grady, DLA Piper; and ADISA Executive Director John Harrison. The letter was signed by current ADISA President Keith Lampi, Inland Private Capital Corporation.

You can read the letter in its entirety here.